The European stock market listings are kicking off again after a summer break, but many companies hoping to copy successful flotation earlier in the year now have to convince investors weary from a flood of new names and burned by high prices.
Enthusiasm for initial public offerings (IPOs) has quadrupled the amount raised in Europe in the first nine months of this year compared to last to a total of $55.5 billion. But the sheer number of deals is starting to put fund managers off and prompt fears from bankers that some of their IPO clients will get lost in the noise, with investors simply not able to schedule time to listen to them all.
Alastair Gunn at Jupiter fund management is already suffering from the deluge. “I’m starting to get a regular stream of stuff coming through the mail,” Gunn, co-manager of Jupiter’s distribution and high income funds, said.
“When we invest in anything, we want to do the legwork, meet the management, understand the business model. But the kind of sausage factory environment we’ve been is not very conducive to doing your homework.”
Craig Coben, co-head of Global Equity Capital Markets (ECM) at BoA Merrill Lynch sees the problem too.
“With so many IPOs in the pipeline, there is a risk of market indigestion, with the weaker companies and more marginal names finding a less receptive hearing,” said Coben.
“One of the practical challenges will be to carve out the time in investors’ diaries and ensure they can devote the necessary time to analyse and model all of these IPOs.”
